Industrial policy of Japan

The industrial policy of Japan was a complicated system devised by the Japanese government after World War II and especially in the 1950s and 1960s. The goal was to promote industrial development by co-operating closely with private firms. The objective of industrial policy was to shift resources to specific industries in order to gain international competitive advantage for Japan. The policies and methods were used primarily to increase the productivity of inputs and to influence, directly or indirectly, industrial investment.

Administrative guidance (gyōsei shidō 行政指導) is a principal instrument of enforcement used extensively throughout the Japanese government to support a wide range of policies. Influence, prestige, advice, and persuasion are used to encourage both corporations and individuals to work in directions judged desirable. The persuasion is exerted and the advice is given by public officials, who often have the power to provide or to withhold loans, grants, subsidies, licenses, tax concessions, government contracts, import permits, foreign exchange, and approval of cartel arrangements. The Japanese use administrative guidance to buffer market swings, anticipate market developments, and enhance market competition.

Mechanisms used by the Japanese government to affect the economy typically relate to trade, labor markets, competition, and tax incentives. They include a broad range of trade protection measures, subsidies, de jure and de facto exemptions from antitrust statutes, labor market adjustments, and industry-specific assistance to enhance the use of new technology. Rather than producing a broad range of goods, the Japanese selected a few areas in which they could develop high-quality goods to produce in vast quantities at competitive prices. A good example is the camera industry, which since the 1960s has been dominated by Japan.

Historically, there have been three main elements in Japanese industrial development. The first was the development of a highly competitive manufacturing sector. The second was the deliberate restructuring of industry toward higher value-added, high productivity industries. In the late 1980s, these were mainly knowledge-intensive tertiary industries. The third element was aggressive domestic and international business strategies.

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